MPs passed the Economic Substance Bill 2018 in the House of Assembly, with the Bill receiving bipartisan support, with MPs on both sides of the aisle noting that the island stands together against external pressures directed at our financial service sector.

The Bill’s explanatory memorandum states it “imposes an obligation on an entity that is engaged in a relevant activity to maintain a substantial economic presence in Bermuda and, in that regard, comply with economic substance requirements.”

Background

Last year the Council of the European Union named 17 jurisdictions as “non-cooperative tax jurisdictions”; with American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and the United Arab Emirates included on the original list, with the list changing as nations meet commitments set by the EU.

Bermuda, while not listed as a “non-cooperative jurisdiction,” was placed on a secondary list along with over 60 other nations and territories.

Citing the “existence of tax regimes that facilitate offshore structures which attract profits without real economic activity,” the Council said “the following jurisdictions are committed to addressing the concerns relating to economic substance by 2018: Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey and Vanuatu.”

Bill Passes With Bipartisan Support

Finance Minister Curtis Dickinson said, “Some parts of the world are envious of our success, and have now openly attacked the core of our economy, our strongest international leg, our international business industry.”

Noting that the European Union are “egged on” by NGOs who believe that if you do not have an income tax regime “something must be wrong with you,” and you are somehow the cause of diverting other countries revenue.

“Such NGOs have clearly won this row, for they have convinced policymakers in the European Union to attack all low or no income tax jurisdictions, including Bermuda.”

Patricia Gordon Pamplin said, “It must be tremendously frustrating for the European Union and for the countries that are members of the European Union to realize that a place as small as Bermuda has the ability to stand on the world stage, to punch above our weight and to maintain a blue chip jurisdiction which has appealed to so many companies over the years. We have done it in a way that they wished that they could have.”

Premier David Burt said, “What we’re doing is a response to the European Union, who has decided that due to whatever political pressures they are facing at home, that this is the best way to address this particular situation.”

“The global financial system, in my opinion, works best when it’s done in a way where there is consensus across all countries and all regions of the world, and the OECD Global Forum is the correct structure for this, however for whatever reason the European Union decided to go outside of that remit and push ahead.”

Deputy OBA Leader Leah Scott started by assuring the Premier that he “has our collective support in making sure that this initiative works,” adding that they “want to vilify the international financial centres, so they bully us.”

“I have a feeling that the sovereign nation that we are affiliated with as a colony had no objection to what the EU is doing,” Rolfe Commissiong said, saying he has “not heard the Prime Minister of the UK stand up to defend our interests here.”

“On the continent of Europe itself you have tax havens, to use that term, such as Ireland, the Netherlands, Luxembourg- all members of the EU, Switzerland an affiliated member. But yet they would ask us to do, what they themselves are not prepared to impose upon their own member countries.”

“They have the might, and they are determined to impose that might and their will, upon a small politically weak country such as Bermuda.”

Saying he wants “to signify very clearly our support for the Government’s intentions here,” Michael Dunkley said “we have to stand tall” and “defend our position against every critic.”

Mr Dunkley said every country needs tax and “they never get enough tax and the easiest way to get more tax is if you can’t get it from within your system, you have to tax somebody else and as somebody said previously before me, well you know the big guys are the bullies and they come after the small guys…that’s not going to change.”

He added while they may “bicker” and “squabble” in the House, the “one thing we’ve never done as Bermudians, is we never bickered when we’ve been attacked from overseas.”

Craig Cannonier, the former Premier who now serves as Opposition Leader, spoke about a time he was abroad and heard the “probably one of the most prejudicial statements a man has ever made to a country, to say, oh well, you need to go back fishing.”

Wayne Furbert, the Junior Minister of Finance, thanked everyone who worked on the matter and also thanked the Opposition for supporting it.

“We don’t grow when things are easy, we grow when we face challenges” Mr Furbert said, adding that “we face these challenges together.”

Saying he is “optimistic,” Mr Furbert said, “We estimate that the amount of companies that are affected by this is roughly 11,000, give a few here and there, companies.

“We only have 15,000 companies on our register, so you’re talking about a significant amount of companies. Just imagine, that at least, if at half of those companies were to put boots on the ground, what impact will it have on this our economy.”

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“Citing the “existence of tax regimes that facilitate offshore structures which attract profits without real economic activity,” the Council said “the following jurisdictions are committed to addressing the concerns relating to economic substance by 2018: Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey and Vanuatu.”

Well, I guess we are in good company in giving in to the terror tactics of the EU.